QBE to pay $10M over force-placed insurance

New York regulators reported a settlement Thursday requiring QBE to pay a $10 million penalty and reform practices when insuring troubled mortgage loans.

The Department of Financial Services said the agreement also calls for restitution to homeowners hurt by force-placed insurance, which lenders obtain when the homeowners fail to maintain coverage required by the mortgage, often because they are in financial trouble.

It followed a similar settlement last month by Assurant Inc. The two companies are responsible for at least 90 percent of that coverage in New York, and that should result in far lower premiums, according to the department. Its investigation found premiums charged to homeowners for less protection, finding some two to 10 times more expensive than voluntary insurance policies.

Sydney, Australia-based QBE did not immediately respond to requests for comment. In 2011, it acquired the force-placed insurance business of Balboa Insurance Co., a subsidiary of Bank of America. Balboa provided that coverage on mortgages serviced by the bank and by fallen mortgage giant Countrywide Financial Corp., which the bank acquired in 2008.

“QBE has done the right thing by adopting these reforms. We now need to ensure that the entire industry in New York — 100 percent of it — is subject to our reforms,” department Superintendent Benjamin Lawsky said. He recently sent a letter to insurance commissioners in other states urging they take similar steps.

Gov. Andrew Cuomo said the reforms are helping end bad behavior by lenders and insurers.

“The kickbacks and payoffs in the force-placed insurance industry used to be a dirty little secret that pushed far too many families off the foreclosure cliff,” he said.

The settlement requires QBE to file a premium rate in New York with a permissible loss ratio of 62 percent, reflecting the portion of premiums paid in claims, with annual reporting and rates refiled every three years. If its actual loss ratio drops below 40 percent in the preceding year, it must refile to raise it.

It prohibits the company from paying commissions back to mortgage banks, servicers or affiliates for policies. It requires refunds through a third-party administrator for homeowners with force-placed policies since 2008 who defaulted on mortgages because of them or were erroneously charged.